Introducción a las finanzas corporati
Tarea capítulos 10, 11 y 13
Gerardo Bonilla Carrillo
Maestría en Finanzas
10 marzo de 2020
nzas corporativas
10, 11 y 13
A01685351
Finanzas
e 2020
Profesor titular: Dr. Luis H. Santacruz
Profesora Tutora: M. Karla Macías González
4. Calculating Returns Suppose you bought a bond with a 4.9 percent coupon rate one year ago for $1
a. Assuming a $1,000 face value, what was your total dollar return on this investment over the past ye
b. What was your total nominal rate of return on this investment over the past year?
c. If the inflation rate last year was 3 percent, what was your total real rate of return on this investmen
Percent coupon rate 4.90%
bond 1 year ago $ 1,010.00
bond sells $ 1,052.00
a. Assuming a $1,000 face value, what was your total dollar return on this investment over the past ye
Face value $ 1,000.00
Interest every year $ 49.00
Total dollar return on investment $ 91.00
b. What was your total nominal rate of return on this investment over the past year?
Total nominal rate of return 9%
c. If the inflation rate last year was 3 percent, what was your total real rate of return on this investmen
Inflation 3%
Real rate of return 6%
9. Calculating Returns and Variability You’ve observed the following returns on SkyNet Data
Corporation’s stock over the past five years: 19 percent, 24 percent, 11 percent, −9 percent, and 13
percent.
a. What was the arithmetic average return on the company’s stock over this 5-year period?
1 19%
2 24%
3 11%
4 -9%
5 13%
Average 11.6%
b. What was the variance of the company’s returns over this period? The standard deviation?
Var 0.016
Standard deviation 0.126
10. Calculating Real Returns and Risk Premiums In Problem 9, suppose the average inflation rate over
this period was 3.6 percent and the average T-bill rate over the period was 4.1 percent.
10. Calculating Real Returns and Risk Premiums In Problem 9, suppose the average inflation rate over
this period was 3.6 percent and the average T-bill rate over the period was 4.1 percent.
a. What was the average real return on the company’s stocK?
Inflation 3.6%
Real return 7.7%
b. What was the average nominal risk premium on the company’s stock?
4.10%
Average nominal risk premium 7.5%
18. Return Distributions Refer back to Table 10.2. What range of returns would you expect to see 68
percent of the time for large-company stocks? What about 95 percent of the time?
Standard
Arithmetic
Series Deviation
Mean (%)
(%)
Small-company stocks* 16.5 31.7
Large-company stocks 12.1 19.8
Long-term corporate bonds 6.4 8.3
Long-term government bonds 6 9.9
ntermediate-term government bonds 5.2 5.6
U.S. Treasury bills 3.4 3.1
Inflation 3 4
The range of returns you would expect to see 68 percent of the time is the mean plus or minus 1 stand
Large-company stocks 12.1 "+/-" 19.8 The range of return is
The range of returns you would expect to see 95 percent of the time is the mean plus or minus 2 stand
Large-company stocks 12.1 "+2/-2" 39.6 The range of return is
nt coupon rate one year ago for $1,010. The bond sells for $1,052 today.
n this investment over the past year?
er the past year?
eal rate of return on this investment?
n this investment over the past year?
er the past year?
eal rate of return on this investment?
g returns on SkyNet Data
11 percent, −9 percent, and 13
over this 5-year period?
? The standard deviation?
ose the average inflation rate over
od was 4.1 percent.
turns would you expect to see 68
nt of the time?
e is the mean plus or minus 1 standard deviation,
-7.7 to 31.9
e is the mean plus or minus 2 standard deviations
-27.5 to 51.7
8. Returns and Standard Deviations Consider the following information:
Rate of Return if State Occurs
Probability
State of
of state of Stock A Stock B Stock C
Economy
economy
Boom 0.75 0.06 0.16 0.33
Bust 0.25 0.14 0.02 -0.06
a. What is the expected return on an equally weighted portfolio of these three stocks?
Boom 18.3%
Bust 3.3%
And spected return of the portafolio 14.6%
b. What is the variance of a portfolio invested 20 percent each in A and B and 60 percent in C
Expected return Boom 24.20%
Expected return Bust -0.40%
Expected return portafolio
Return portafolio 0.1805
Varieance and estándar deviation of protafolio
σ^2 = 1.13%
σ= 10.65%
17. Using the SML Asset W has an expected return of 12.3 percent and a beta of 1.2. If the risk-free rate is
percent, complete the following table for portfolios of Asset W and a risk-free asset. Illustrate the relations
between portfolio expected return and portfolio beta by plotting the expected returns against the betas. W
is the slope of the line that results?
Porcentage
Portafolio
of Portafolio
Portafolio in Expected Beta
Return
Asset W
0% 4.10% 0.00% Expected return 12.30%
25% 5.12% 1.28% Beta 1.20%
50% 7.17% 3.59% risk-free 4%
75% 10.25% 7.69%
100% 14.35% 14.35%
125% 19.47% 24.34%
150% 25.62% 38.43%
22. Portfolio Returns and Deviations Consider the following information about three stocks:
Rate of Return if State Occurs
Probability
State of
of state of Stock A Stock B Stock C
Economy
economy
Boom 0.25 0.25 0.35 0.4
Normal 0.55 0.18 0.13 0.03
Bust 0.2 0.03 -0.18 -0.45
a. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio expected
b. If the expected T-bill rate is 3.80 percent, what is the expected risk premium on the portfolio?
c. If the expected inflation rate is 3.50 percent, what are the approximate and exact expected real returns o
and exact expected real risk premiums on the portfolio
a. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio expected
Expected return Boom 32.00%
Expected return Normal 13.00%
Expected return Bust -15.00%
Expected return portafolio
Return portafolio 12.15%
Varieance and estándar deviation of protafolio
σ^2 = 2.46%
σ= 15.69%
b. If the expected T-bill rate is 3.80 percent, what is the expected risk premium on the portfolio?
T-bill 3.80%
Risk premium 8.35%
c. If the expected inflation rate is 3.50 percent, what are the approximate and exact expected real returns o
and exact expected real risk premiums on the portfolio
Inflation 3.50%
Approximate return on the portafolio 8.65%
Exact expected real returns on portafol 8.36%
Approximate real risk 8.35%
Exact expected real risk premium 8.07%
three stocks?
and 60 percent in C
beta of 1.2. If the risk-free rate is 4
free asset. Illustrate the relationship
ected returns against the betas. What
about three stocks:
n C, what is the portfolio expected return? The variance? The standard deviation?
mium on the portfolio?
and exact expected real returns on the portfolio? What are the approximate
n C, what is the portfolio expected return? The variance? The standard deviation?
mium on the portfolio?
and exact expected real returns on the portfolio? What are the approximate
Ecu. Fisher
3. Calculating Cost of Debt Shanken Corp. issued a 30-year, 5.9 percent semiannual bond three ye
sells for 106 percent of its face value. The company’s tax rate is 22 percent
a. What is the pretax cost of debt?
b. What is the aftertax cost of debt?
c. Which is more relevant, the pretax or the aftertax cost of debt? Why?
Time 30 year
Semiannual bond 5.90% 3 years ago
face value 106%
tax rate 22%
a. What is the pretax cost of debt?
Suppose you bought a bond for $ 1,010.00
Face value $ 1,070.60
Interest every year $ 189.50
Total dollar return on investment before tax $ 250.10
Before cost of debt 5.9%
b. What is the aftertax cost of debt?
Total dollar return on investment after tax $ 238.59
Aftertax cost of debt 4.6%
c. Which is more relevant, the pretax or the aftertax cost of debt? Why?
Debt before tax is more relevant because the percentage resulting is greater than the cost after
11. Finding the WACC Given the following information for Huntington Power Co., find the WACC.
Debt: 17,000 4.9 percent coupon bonds outstanding, $2,000 par value, 20
of par; the bonds make semiannual payments
Common stock: 425,000 shares outstanding, selling for $67 per share; the beta is .8
Market: 7 percent market risk premium and 3.5 percent risk-free rate.
Tax rate 21%
Debt 17000
Coupon bonds outstanding 4.90% 6%
Par value $ 2,000
Years to matrity 20
Selling of par 105% 105%
Common stock 425000
Selling common stock $ 67.00
Beta 88% 110%
Market risk premium 7%
Risk free rate 3.50%
Market value of debt $ 35,700,000
Market value of equity $ 28,475,000.00
Market value of the firm $ 64,175,000
Cost of equity using the CAPM
Rs 10%
Cost of debt is the YTM of the bonds, so:
P0 1.83339267
percent semiannual bond three years ago. The bond currently
22 percent
ting is greater than the cost after tax of the debt
ngton Power Co., find the WACC. Assume the company’s tax rate is 21 percent.
outstanding, $2,000 par value, 20 years to maturity, selling for 105 percent
al payments
ng for $67 per share; the beta is .88.
nd 3.5 percent risk-free rate.
